Concerns of oversupply of ferro-niobium in the US are likely to be heightened in coming weeks and months as factories in China, the largest consumer of the alloy, have partly seized up amid work slowdowns caused by the coronavirus.
Even before the virus' outbreak, shipments of ferro-niobium to China from top global producer Brazil had dropped by over 80pc in December/January from a year earlier.
Brazilian exports of ferro-niobium to China fell to 1,750 metric tonnes (t) in the two months from a year earlier, according to data from Brazil's Ministry of Development, Industry, and Foreign Trade. Until December, Brazil's exports of ferro-niobium to China had averaged 3,622t a month last year.
Market participants are increasingly concerned that the steep drop in demand in China in late 2019 could extend into 2020 because of logistical complications and slower mill ramp-ups from the lunar new year holidays because of the coronavirus. In turn, slower demand in slower China might force suppliers to redirect volumes to an already well-supplied US market.
Brazil accounted for an estimated 88pc of total global niobium production — used to make the alloy for construction steel — in 2019, according to the US Geological Survey. China accounted for 38pc of the ferro-niobium exported from Brazil in the same period.
Ferro-niobium is used as a substitute for ferro-vanadium when its prices trade at a premium. The market has been slowly correcting after a late-2018/early-2019 ferro-vanadium rally, largely a response to supply concerns amid stricter Chinese rebar standards, which led to increased substitution among mills.
The US Geological Survey in August had expected Chinese ferro-niobium consumption to grow by 50pc in 2019. But Brazilian exports to China increased by only 14pc to 39,800t last year.
Argus last assessed US ferro-niobium prices at $17.35-18.10/lb on 31 January, as much as a $5.15/lb premium to ferro-vanadium, undercutting most demand for substitution.
Imports have continued to flow into the US, despite sparse spot market trading, according to market sources. US imports of ferro-niobium from Brazil totaled 9,670t in 2019, up from 8,560t in 2018. Imports continue to climb, rising by 38pc to 664t in January from a year earlier.
Should China's imports of Brazilian ferro-niobium remain muted, Brazil's major producers will either need to cut capacity or global consumers will need to boost intake to avoid a drop in ferro-niobium prices.
By Nicholas Bell
